Sir Mervyn King, Governor of the Bank of England, would have been sacked three years ago if the Labour government could have found another candidate.
The plan to make him the first governor in 50 years to be denied a second term in office is revealed in the forthcoming memoirs of the former chancellor Alistair Darling. Sir Mervyn ran into heavy criticism at the time of the collapse of Northern Rock in 2007 which presaged the worldwide banking crisis the following year. He was accused of being too slow to react after being privately warned of the bank's problems a month before the news broke.
In the ex-chancellor's memoirs, according to a leak published yesterday by the Labour Uncut website, Mr Darling describes the Governor as "amazingly stubborn and exasperating" and confirms that a plan to sack him in 2008 was abandoned only because they could not find a suitable alternative. He also criticises the "prickly and strained" relations between Mr King and the head of the Financial Services Authority, Adair Turner, as one of the reasons regulators failed to prevent the banking crash of 2008.
The memoirs will be a blow to Sir Mervyn's reputation as he battles to restore confidence in the economy. Earlier this month, he had to write to the present Chancellor, George Osborne, to explain why inflation is more than double the Government's target of 2 per cent. He has forecast that it will fall later in the year, and that the greater dangers are turbulence in the money markets and Europe's debt crisis, which could hit the UK's weakened economy. With these problems looming, it will not help Sir Mervyn to have the public reminded of his much-criticised handling of previous crises.
Other parts of Mr Darling's memoirs will come as unwelcome news for the Labour leadership as they prepare for their annual conference later this month, which will mark the end of Ed Miliband's first year as leader. Mr Darling adds extra detail to the unhappy story of Gordon Brown's doomed premiership, reinforcing the image of a suspicious and driven Prime Minister who seemed unable to work harmoniously with anyone except a handful of aides or former aides who gave him total loyalty.
But the most potentially damaging comments in the leaked extracts concern Ed Balls who, unlike Gordon Brown, is still an active politician and, as shadow Chancellor, is the second most important figure on Labour's current front bench. Mr Darling's memoirs confirm for the first time a widely rumoured story that Mr Brown tried to prise him out of the Treasury in 2009 to put Mr Balls in his place. Mr Darling was offered the chance of a different cabinet post, but insisted that he would either stay where he was or retire to the back benches, after which the Prime Minister relented.
The memoirs claim that Mr Balls then ran a shadow Treasury operation, with another of Gordon Brown's former advisers, the newly ennobled Shriti Vadera. Mr Darling's remarks echo those made by Tony Blair in his memoirs, published last year, in which the former prime minister acknowledged that Mr Balls was "really able" but complained that he "behaved badly at points, and was wrong on policy".
Mr Brown, who became increasingly "brutal and volcanic" in his dealings with his Chancellor, wanted to make Baroness Vadera a Treasury minister, but the Chancellor refused to have her on board because she was "only happy if there was blood on the floor – preferably that of her colleagues", Mr Darling wrote. But he accepted Yvette Cooper, the current shadow Home Secretary, as Chief Secretary to the Treasury although he understood that she had been put there to keep an eye on him.
The revelations were seized upon by the Tories, who hope to create trouble at the top of the Labour Party in the run-up to their annual conference. Party chairman Baroness Warsi said: "Alistair Darling's memoirs should give Ed Miliband some concerns about Ed Balls' suitability to be shadow Chancellor."